If you own a historic property in New Orleans that generates income, you might be able to offset the cost of your renovation in the form of tax credits. We talk to clients all the time who’ve never heard of restoration tax credits, or who assumed they were too complicated or they don’t qualify. In this guide we break down what restoration tax credits are, how the application process works, and how working with an architect can help you get the most value out of the program.
A quick note before we dive in: These credits are specifically for income-producing historic buildings, which can include part of owner-occupied properties where you live on one side and rent the other. If you’re renovating your personal single-family home, this program won’t apply to you directly. There are other incentives worth exploring, which we’ll touch on below.
What Are Restoration Tax Credits?
A tax credit reduces your tax liability dollar for dollar. If you owe $8,000 in taxes and hold a $5,000 credit, you’d only owe $3,000. Historic restoration tax credits are awarded once a qualifying rehabilitation project is complete, and they’re tied to the person or entity holding the property title.
Louisiana property owners can potentially access two credits that stack together: a Louisiana State Commercial Tax Credit and a Federal Rehabilitation Tax Credit. Together these credits can make a meaningful dent in your renovation budget.
Which Properties Qualify?
- In general, a property is a strong candidate for restoration tax credits if it:
- Generates income (a rental property, multi-family homes, or commercial spaces)
- Sits within a National Register Historic District, is individually listed on the National Register, or is located within a Downtown Development or Cultural District
- Will undergo a substantial rehabilitation, meaning renovation costs exceed the building’s adjusted tax basis (or a $5,000 minimum, for federal purposes)
- Retains enough of its original structure to meet preservation standards
As noted above, owner-occupied residences that don’t produce income typically won’t qualify for the commercial credits listed, though the Restoration Tax Abatement program and Louisiana Cultural Districts incentives may offer other paths worth exploring for owner-occupied and mixed-use properties.
Louisiana State Commercial Tax Credit
This program has become more generous in recent years, equaling 25% of qualified rehabilitation expenses (QREs), or 35% if the property is located in a designated rural area. Currently the program will sunset December 31, 2028.
So what actually counts? The good news is that most of what goes into a real renovation are eligible for tax credits. Things like:
- Structural repairs and framing
- Plumbing and electrical systems
- Mechanical and HVAC systems
- Windows and doors
- Architectural plans and design fees
If it’s part of bringing the building back to a usable, functioning state, there’s a good chance it qualifies.
Where it gets a little less generous is anything outside the building itself. Landscaping, fences, parking lots, decking, and cabinetry generally don’t count. Neither does the cost of acquiring the property. And while the credit won’t cover the cost of an addition, an addition can still be part of the design. The credit is built to reward the work of restoring what’s already there, not adding extras around it.
If you’re unsure whether a specific line item in your renovation budget will qualify, it’s worth asking early before you’ve locked in a scope of work.
Federal Rehabilitation Tax Credit
Administered by the National Park Service and IRS, this program offers a 20% credit on QREs for income-producing historic buildings listed individually on the National Register or located within a National Register Historic District. Much of New Orleans falls within a national historic district, so this applies to a wide range of local properties.
To qualify, rehabilitation costs must exceed the building’s adjusted value, and the same owner must hold the property for five years to capture the full benefit. Since 2018, the federal credit has been distributed over a five-year period rather than all at once in the year the building goes into service, which is worth factoring into your project’s financial planning.
How to Apply for Tax Credits
The application process generally follows these steps:
- Confirm eligibility. Determine whether your property and neighborhood meet the location and building-type requirements.
- Document the building’s historic character. This establishes the property as a certified historic structure with the state historic preservation office.
- Document the scope of work. This identifies which planned expenses qualify as qualified rehabilitation expenses (QREs) and confirms the work will meet the Secretary of the Interior’s Standards for Rehabilitation.
- Submit the application to the Louisiana Division of Historic Preservation, which reviews for compliance with preservation standards, and to the Louisiana Department of Revenue, which reviews project costs.
- Complete the rehabilitation according to the approved scope.
- Receive the credit once the project is complete and the building is placed into service.
*Both the state and federal applications now require electronic submission.
Limitations and Restrictions to Know
- Tax credits apply only to work within the building’s original footprint. Additions or new construction outside that footprint won’t qualify for credits but can be part of the submitted design.
- Owners must retain the property for five years to receive the full federal credit.
- There’s an annual statewide cap of $125 million for the state commercial credit, so timing your application matters.
- Rehabilitation must meet the Secretary of the Interior’s Standards, which can affect design decisions around materials, windows, and exterior details.
How to Transfer a Tax Credit
If you receive state or federal tax credits but can’t fully use them, whether that’s because you’re a nonprofit or have limited passive income, both credits can typically be transferred as part of a financial transaction. State credits generally come with fewer restrictions on transfer than federal ones, and have a robust marketplace with transactions commonly returning around 80% of the credit’s value. Federal tax credit exchanges are typically for projects of $10m or more.
How an Architect Can Help Maximize Your Benefit
Successfully claiming restoration tax credits takes more than good design. It requires documentation that satisfies both state and federal reviewers, a scope of work that clearly separates qualifying and non-qualifying expenses, and construction details that meet preservation standards without compromising the building’s function for modern use. An experienced architect can help you:
- Determine eligibility before you commit to a renovation plan
- Prepare the historic documentation required for certification
- Structure the scope of work to maximize QREs
- Design renovations that satisfy the Secretary of the Interior’s Standards while still meeting your goals for the space
- Navigate the review process with the Division of Historic Preservation
Thinking About a Restoration Project?
If you own an income-producing historic property in New Orleans, restoration tax credits could make your renovation significantly more affordable.
Disclaimer: This article is intended for educational purposes only and does not represent professional legal or tax advice. Consult a qualified tax professional for guidance specific to your project.
